New claims dip

jobless total still high

`No improvement yet' in the market

May 09, 2003|By From Tribune news services.

WASHINGTON — Applications for initial unemployment benefits fell last week, but stayed above the key 400,000 level for a 12th straight week, the longest stretch since the economy was emerging from a recession in 1992.

Jobless claims dropped to 425,000 from 453,000 the previous week, the Labor Department said. But even with the decline, claims remained above 400,000, the level economists associate with a stagnant job market.

Companies are trimming payrolls to shore up profits after the weakest three months of consumer spending in a decade. Retail sales at stores open at least a year rose an average 1.5 percent in March and April, the smallest gain for those two months since at least 1986, according to a Bank of Tokyo-Mitsubishi Ltd. survey.

"These persistently high claims pose a significant threat to the prospects of a second-half upturn, since weak job conditions make consumers more cautious about spending," said David Resler, chief economist at Nomura Securities International Inc.

The four-week moving average of claims, which irons out weekly fluctuations, rose by 3,250, to 446,000, the highest level in a year.

The number of people continuing to collect jobless benefits rose by 6,000, to 3.7 million, for the week ended April 26, the latest week for which figures were available. That's the highest level in six months.

"What is worrying is that continuing claims continue to rise," said Astrid Adolfson, an economist at MCM MoneyWatch in New York. "It confirms that the jobless are having a lot of trouble finding jobs. The bottom line is there is no improvement yet" in the job market.

Earnings rose 15 percent for the 438 companies in the Standard & Poor's 500 index that have already reported first-quarter results, topping the average analyst estimate by 6.5 percent, according to Thomson Financial/First Call. Still, sales climbed only 10 percent.

The persistent loss of jobs may undermine the economy by causing consumers to curtail spending, which accounts for 70 percent of all goods and services produced.

"It's a challenging environment out there," said Steve Monticelli, president of Mosaic Investments LLC. "Jobs are tight, and incomes aren't what they were."

If claims "remain weak for another four to six weeks, we would start to get quite concerned" about the economy's prospects, said Jan Hatzius, an economist at Goldman Sachs in New York.

"By then, it will be much harder to blame the war, bad weather or high oil prices for any weakness," he said.